Schwazze Announces First Quarter Results

Revenue Increases 504% to $19.3 Million Compared to $3.2 Million During the Same Period

Proforma Revenue Estimated at $26.8 Million

Raising Low End of Guidance - Total Projected Revenue of Approximately $110 Million - $125 Million

Adjusted EBITDA $30 Million - $36 Million

Conference Call and Webcast Scheduled for Today – 4:30 pm ET

DENVER--(BUSINESS WIRE)-- Schwazze, (OTCQX:SHWZ) ("Schwazze" or the “Company"), announced financial results for its first quarter year ended March 31, 2021 (“Q1 2021”). During the first quarter of 2021, the Company announced the completion of its acquisition of Star Buds and announced a Q1 2021 revenue increase of $19.3 million compared to $3.2 million during the same period in 2020, representing a 504% increase. Proforma revenue for the first quarter 2021 was estimated at $26.8 million, which assumes that all Star Buds had been acquired on January 1, 2021. The Company’s adjusted EBITDA was $5.8M for Q1 2021. The Company also reported positive cash flow from operations of $1.7 million compared to last year’s loss of $2.5 million.

Same store sales of the thirteen Star Buds dispensaries when compared to last year, prior to taking ownership of the assets, were $18.8M up 38%. Average basket size is $58.79 up 19.5%, and recorded customer visits are 319,800 up 15.8%. The Company does not have Q1 2020 data for the four Mesa Organics stores acquired in April 2020 for comparisons this quarter but expects to present data for these stores in a similar manner after the end of the next quarter.

We are pleased with our revenue and adjusted EBITDA results. The implementation of our operating system is having a positive impact in key measurable areas. Revenues are up significantly due to an increase in both average basket size and customer visits, and margins are improving through pricing and promotional efforts as well as consolidated purchasing. We are also seeing a marked improvement in growth in our wholesale revenues and margins.” stated Justin Dye, CEO of Schwazze. “Our stated objective is to grow through internal growth and through accretive acquisitions, and I believe thus far, we have demonstrated this successfully. We are now focused on doubling the Company’s revenue projections through organic growth initiatives and additional acquisitions in targeted markets and states.”

First Quarter 2021 Revenue

Total revenue was $19.3 million during the three months ended March 31, 2021, representing an increase of approximately 504%, compared to $3.2 million during the same period in 2020. Retail sales grew to $11.8 million over the quarter from zero dollars the previous year and wholesale operations revenue increased to $7.4 million from 2.5 million compared to the same period last year. Other sales decreased to $0.1 million from $0.7 million. The increase in retail and wholesale revenue is attributed to the acquisition of Mesa Organics in April 2020 and the completion of the acquisition of Star Buds in March 2021. The decrease in Other revenue is due to a reduced focus on consulting.

Total cost of goods and services were $12.1 million during the three months ended March 31, 2021 compared to $2.1 million during the same period in 2020. This increase was due to increased sales of product and a one-time $2.2 million purchase accounting charge for writing up inventory to fair market value.

Gross profit increased to $7.3 million during the three months ended March 31, 2021 compared to $1.1 million during the same period in 2020. Gross profit margin increased as a percentage of revenue from 32.9% to 37.5% mostly driven by the strength of the Mesa Organics and Start Buds acquisitions, adjusted for the one-time purchase accounting the gross margin for Q1 2021 was 48.9%.

Total operating expenses were $8.7 million during the first quarter compared to $5.2 million during the same period in 2020. The higher expenses were due to increased selling, general and administrative expenses from the addition of the dispensaries, professional service fees, and non-cash, stock-based compensation.

Q1 2021 net loss was $3.6 million, or a loss of approximately $0.09 per share on a basic weighted average, as compared to net loss of $1.4 million, or a loss of approximately $0.03 per share on a basic weighted average during the three months ended March 31, 2020.

Q1 2021 adjusted EBITDA was $5.8 million, 30.2% of revenue. This is derived from Net Loss Before Income Taxes and adjusting for Other Income, one-time expenses, merger and acquisition and capital raising costs, non-cash related compensation costs, and depreciation and amortization. See the financial table for Adjusted EBITDA below for details for Q1 2021 adjustments.

During the first quarter, the Company generated positive operating cash flow of $1.7 million and $21.7 million in total cash flow ending the quarter with $23.0 million in cash and cash equivalents.

Nancy Huber, CFO for Schwazze commented, “We are very pleased to report positive operating cash flow. We have stated since the beginning of our transformation to a plant touching business, that we believe a focus on positive cash flow was essential to our business model. Our target for that objective was the completion of the Star Bud acquisition which was met during the quarter.”

Updated 2021 Guidance

The Company is updating the following guidance for 2021 that excludes any unannounced acquisitions. We have revised projections on the low-end of previous revenue guidance, from $105 million to $110 million and adjusted EBITDA up from $28 million to $30 million on the low-end.

New guidance as follows:

  • Projected revenue of approximately $110 million to $125 million; and
  • Projected adjusted EBITDA, a non-GAAP measure, of approximately $30 million to $36 million.

The Company remains optimistic regarding the full year based upon reported results to date, the completion of the Star Bud acquisition and the integration of the Mesa Organics and Star Bud dispensaries which is proceeding above expectations.

Adjusted EBITDA represents income (loss) from operations, as reported, before tax, adjusted to exclude non-recurring items, other non-cash items, including stock-based compensation expense, depreciation and amortization, and further adjusted to remove acquisition related costs, and other one-time expenses, such as severance. The Company uses adjusted EBITDA as it believes it better explains the results of its core business. The Company has not reconciled guidance for adjusted EBITDA to the corresponding GAAP financial measure because it cannot provide guidance for the various reconciling items. The Company is unable to provide guidance for these reconciling items because it cannot determine their probable significance, as certain items are outside of its control and cannot be reasonably predicted. Accordingly, a reconciliation to the corresponding GAAP financial measure is not available without unreasonable effort.

Q1 2021 Webcast

Investors and stakeholders are invited to participate in the conference call by dialing (201) 389-0879 or listen to the webcast from the Company's website at https://ir.schwazze.com The webcast will be available on the company’s website.

Following the webcast, Chief Executive Officer, Justin Dye and Chief Financial Officer, Nancy Huber will answer investor questions. Investors may submit questions in advance or during the conference call itself through the weblink: http://public.viavid.com/index.php?id=144562. This weblink has been posted to the Company’s website and will be archived on the website. All Company SEC filings can also be accessed on the Company website at https://ir.schwazze.com/sec-filings

About Schwazze

Schwazze (OTCQX: SHWZ) is building the premier vertically integrated cannabis company in Colorado and plans to take its operating system to other states where it can develop a differentiated leadership position. Schwazze is the parent company of a portfolio of leading cannabis businesses and brands spanning seed to sale. The Company is committed to unlocking the full potential of the cannabis plant to improve the human condition. Schwazze is anchored by a high-performance culture that combines customer-centric thinking and data science to test, measure, and drive decisions and outcomes. The Company's leadership team has deep expertise in retailing, wholesaling, and building consumer brands at Fortune 500 companies as well as in the cannabis sector. Schwazze is passionate about making a difference in our communities, promoting diversity and inclusion, and doing our part to incorporate climate-conscious best practices. Medicine Man Technologies, Inc. was Schwazze’s former operating trade name. The corporate entity continues to be named Medicine Man Technologies, Inc.

Schwazze derives its name from the pruning technique of a cannabis plant to enhance plant structure and promote healthy growth.

 

MEDICINE MAN TECHNOLOGIES, INC.

CONDENSED BALANCE SHEETS

Expressed in U.S. Dollars

 

All accompanying notes to the financial statements can be found within the SEC Form 10-Q filed on May 13, 2021

 

March 31, 2021

December 31, 2020

 

(Unaudited)

(Audited)

Assets

 

 

Current assets

 

 

Cash and cash equivalents

$

22,966,320

 

$

1,231,235

 

Accounts receivable, net of allowance for doubtful accounts

 

2,365,063

 

 

1,270,380

 

Accounts receivable – related party

 

 

 

80,494

 

Inventory

 

5,588,257

 

 

2,619,145

 

Notes receivable – related party

 

40,231

 

 

181,911

 

Prepaid expenses

 

627,016

 

 

614,200

 

Total current assets

 

31,586,887

 

 

5,997,365

 

Non-current assets

 

 

Fixed assets, net accumulated depreciation of $1,032,211 and $872,579, respectively

 

3,089,027

 

 

2,584,798

 

Goodwill

 

40,532,910

 

 

53,046,729

 

Intangible assets, net accumulated amortization of $1,796,386 and $200,456, respectively

 

97,589,114

 

 

3,082,044

 

Marketable securities, net of unrealized gain (loss) of $214,630 and ($129,992), respectively

 

491,412

 

 

276,782

 

Accounts receivable – litigation

 

3,063,968

 

 

3,063,968

 

Other noncurrent assets

 

423,710

 

 

51,879

 

Operating lease right of use assets

 

4,242,124

 

 

2,579,036

 

Total non-current assets

 

149,432,265

 

 

64,685,236

 

Total assets

$

181,019,152

 

$

70,682,601

 

Liabilities and Stockholders’ Equity

 

 

Current liabilities

 

 

Accounts payable

$

2,481,572

 

$

3,508,478

 

Accounts payable – related party

 

41,123

 

 

48,982

 

Accrued expenses

 

8,298,446

 

 

2,705,445

 

Derivative liabilities

 

2,301,295

 

 

1,047,481

 

Deferred revenue

 

 

 

50,000

 

Notes payable – related party

 

 

 

5,000,000

 

Total current liabilities

 

13,122,436

 

 

12,360,386

 

Long-term liabilities

 

 

Long term debt

 

54,250,000

 

 

13,901,759

 

Lease liabilities

 

4,342,018

 

 

2,645,597

 

Total long-term liabilities

 

58,592,018

 

 

16,547,356

 

Total liabilities

 

71,714,454

 

 

28,907,742

 

Shareholders’ equity

 

 

Common stock $0.001 par value. 250,000,000 authorized, 42,819,815 shares issued and 42,331,595 outstanding as of March 31, 2021 and 42,601,773 shares issued and 42,169,041 outstanding as of December 31, 2020, respectively.

 

42,820

 

 

42,602

 

Preferred stock $0.001 par value. 10,000,000 authorized. 87,266 shares issued and outstanding as of March 31, 2021 and 19,716 shares issued and outstanding as of December 31, 2020, respectively.

 

87

 

 

20

 

Additional paid-in capital

 

157,530,563

 

 

85,357,835

 

Accumulated deficit

 

(46,823,076

)

 

(42,293,098

)

Common stock held in treasury, at cost, 488,220 shares held as of March 31, 2021 and 432,732 shares held as of December 31, 2020.

 

(1,445,696

)

 

(1,332,500

)

Total shareholders' equity

 

109,304,698

 

 

41,774,859

 

Total liabilities and stockholders’ equity

$

181,019,152

 

$

70,682,601

 

 

MEDICINE MAN TECHNOLOGIES, INC.

CONDENSED STATEMENT OF OPERATIONS AND COMPREHENSIVE LOSS (UNAUDITED)

For the Three Months Ended March 31, 2021 and 2020

Expressed in U.S. Dollars

 

Three Months Ended March 31,

 

2021

 

2020

Operating revenues

 

 

Retail

$

11,816,200

 

$

 

Wholesale

 

7,446,265

 

 

2,528,931

 

Other

 

77,650

 

 

674,203

 

Total revenue

 

19,340,115

 

 

3,203,134

 

Cost of goods and services

 

 

Cost of goods and services

 

12,087,111

 

 

2,148,535

 

Total cost of goods and services

 

12,087,111

 

 

2,148,535

 

Gross profit

 

7,253,004

 

 

1,054,599

 

Operating expenses

 

 

Selling, general and administrative

 

3,189,638

 

 

666,919

 

Professional services

 

2,195,108

 

 

1,248,988

 

Salaries

 

1,869,358

 

 

1,997,036

 

Stock-based compensation

 

1,483,806

 

 

1,252,731

 

Total operating expenses

 

8,737,910

 

 

5,165,674

 

Loss from operations

 

(1,484,906

)

 

(4,111,075

)

Other income (expense)

 

 

Interest income (expense), net

 

(961,282

)

 

48,042

 

Gain on forfeiture of contingent consideration

 

 

 

1,462,636

 

Unrealized gain (loss) on derivative liabilities

 

(1,253,814

)

 

1,191,963

 

Gain (loss) on sale of assets

 

292,479

 

 

 

Unrealized gain (loss) on investment

 

214,630

 

 

29,124

 

Total other income (expense)

 

(1,707,987

)

 

2,731,765

 

Loss before income taxes

 

(3,192,893

)

 

(1,379,310

)

Provision for income tax (benefit) expense

 

456,614

 

 

 

Net loss

$

(3,649,507

)

$

(1,379,310

)

 

 

 

Loss per share attributable to common shareholders

 

 

Basic and diluted loss per share

$

(0.09

)

$

(0.03

)

Weighted average number of shares outstanding, basic and diluted

 

42,616,309

 

 

39,952,628

 

 

 

 

Comprehensive loss

$

(3,649,507

)

$

(1,379,310

)

 

See accompanying notes to the financial statements

 

MEDICINE MAN TECHNOLOGIES, INC.

STATEMENT OF CASH FLOWS (UNAUDITED)

For the Three Months Ended March 31, 2021 and 2020

Expressed in U.S. Dollars

 

 

Three Months Ended March 31,

 

2021

 

2020

Cash flows from operating activities

 

 

Net loss for the period

$

(3,649,507

)

 

$

(1,379,310

)

Adjustments to reconcile net income to net cash provided by operating activities

 

 

 

Depreciation and amortization

 

1,790,568

 

 

 

6,113

 

Gain on forfeiture of contingent consideration

 

-

 

 

 

(1,462,636

)

(Gain) loss on change in derivative liabilities

 

1,253,814

 

 

 

(1,191,963

)

(Gain) loss on investment, net

 

(214,630

)

 

 

(29,124

)

Stock based compensation

 

1,483,806

 

 

 

1,252,731

 

Changes in operating assets and liabilities

 

 

 

Accounts receivable

 

(1,014,189

)

 

 

(107,426

)

Accrued interest receivable

 

-

 

 

 

(1,248

)

Inventory

 

225,878

 

 

 

42,251

 

Prepaid expenses and other current assets

 

(12,816

)

 

 

 

Other assets

 

(371,831

)

 

 

(178,290

)

Operating lease right of use assets and liabilities

 

33,334

 

 

 

5,053

 

Accounts payable and other liabilities

 

2,224,092

 

 

 

572,827

 

Deferred revenue

 

(50,000

)

 

 

 

Net cash (used in) provided by operating activities

 

1,698,519

 

 

 

(2,471,022

)

 

 

 

 

Cash flows from investing activities

 

 

 

Purchase of fixed assets

 

(633,114

)

 

 

(307,178

)

Cash consideration for acquisition of business

 

(65,109,039

)

 

 

 

Issuance of notes receivable

 

141,680

 

 

 

 

Net cash used in investing activities

 

(65,600,473

)

 

 

(307,178

)

 

 

 

 

Cash flows from financing activities

 

 

 

Proceeds from issuance of debt, net

 

40,348,241

 

 

 

 

Repayment of notes payable

 

(5,000,000

)

 

 

 

Proceeds from issuance of common stock, net of issuance costs

 

50,282,798

 

 

 

 

Net cash provided by financing activities

 

85,631,039

 

 

 

 

 

 

 

 

Net (decrease) increase in cash and cash equivalents

 

21,729,085

 

 

 

(2,778,200

)

Cash and cash equivalents at beginning of period

 

1,237,235

 

 

 

11,853,627

 

Cash and cash equivalents at end of period

$

22,966,320

 

 

$

9,075,427

 

Supplemental disclosure of cash flow information:

 

 

 

Cash paid for interest

$

897,247

 

 

$

 

See accompanying notes to the financial statements

 

MEDICINE MAN TECHNOLOGIES, INC.

Adjusted EBITDA Reconciliation

Non-GAAP measurement

(UNAUDITED)

For the Three Months Ended March 31, 2021

Expressed in U.S. Dollars

 

 

Three Months Ended March 31,

 

2021

 

2020

Net Loss before Income tax

$

(3,192,891

)

$

(1,379,310

)

Less

 

 

Other Income / (Expense)

 

(1,707,986

)

 

2,731,766

 

Addbacks

 

 

Inventory Adjustment to fair market value for Star Buds purchase accounting

 

2,164,686

 

 

 

Marketing Infrastructure improvements

 

193,120

 

 

 

Severance

 

 

 

166,003

 

Non- Cash Stock Compensation

 

1,483,806

 

 

1,252,731

 

Deal Related Expenses

 

745,944

 

 

 

Capital Raise Related Expenses

 

951,119

 

 

35,319

 

Depreciation and Amortization

 

1,790,568

 

 

6,113

 

 

 

 

Total Addbacks

$

7,329,243

 

$

1,460,166

 

 

 

 

Adjusted EBITDA

$

5,844,338

 

$

(2,650,909

)

Forward-Looking Statements

This press release contains “forward-looking statements.” Such statements may be preceded by the words “may,” “estimates”, “predicts,” or similar words. Forward-looking statements are not guarantees of future performance, are based on certain assumptions, and are subject to various known and unknown risks and uncertainties, many of which are beyond the Company’s control and cannot be predicted or quantified. Consequently, actual results may differ materially from those expressed or implied by such forward-looking statements. Such risks and uncertainties include, without limitation, risks and uncertainties associated with (i) our inability to manufacture our products and product candidates on a commercial scale on our own or in collaboration with third parties; (ii) difficulties in obtaining financing on commercially reasonable terms; (iii) changes in the size and nature of our competition; (iv) loss of one or more key executives or scientists; (v) difficulties in securing regulatory approval to market our products and product candidates; (vi) our ability to successfully execute our growth strategy in Colorado and outside the state, (vii) our ability to identify and consummate future acquisitions that meet our criteria, (viii) our ability to successfully integrate acquired businesses and realize synergies therefrom, (ix) the actual revenues derived from the Company’s Star Buds assets, (x) the Company’s actual revenue and adjusted EBITDA for 2021, (xi) the Company’s ability to generate positive cash flow for the rest of 2021 (xii) the ongoing COVID-19 pandemic, (xiii) the timing and extent of governmental stimulus programs, and (xiv) the uncertainty in the application of federal, state and local laws to our business, and any changes in such laws. More detailed information about the Company and the risk factors that may affect the realization of forward-looking statements is set forth in the Company’s filings with the Securities and Exchange Commission (SEC), including the Company’s Annual Report on Form 10-K and its Quarterly Reports on Form 10-Q. Investors and security holders are urged to read these documents free of charge on the SEC’s website at http://www.sec.gov. The Company assumes no obligation to publicly update or revise its forward-looking statements as a result of new information, future events or otherwise except as required by law.

Investors
Joanne Jobin
Investor Relations
Joanne.jobin@schwazze.com
647 964 0292

Media
Julie Suntrup, Schwazze
Vice President | Marketing & Merchandising
julie.suntrup@schwazze.com
303 371 0387

Source: Schwazze